China: An Emerging Imperialist Power and the Underlying Implications
- Anand Singh
The heads of 29 nations and the business representatives of 130 countries participated in the ‘One Belt One Road’ summit held on 14th-15th May 2017 in Chinese capital Beijing. In this summit Chinese President Xi Jinping claimed that China had the ethical and practical capacity to provide leadership in context of the free trade in the world. The world media extensively covered this summit and many bourgeois analysts also presented it as an indication of the rise of Chinese dominance in the world imperialist system. Earlier, at the meet of world economic forum in Davos in January, Xi Jinping had made claims regarding the leading role of China in world capitalism in the era of globalization in the context of US president Donald Trump’s protectionist policies. The material reason behind this ambition of the Chinese ruling class to lead word capitalism in the current era of neoliberal globalization is the rise of China in recent years as an emerging imperialist power on the global level. It is, therefore, of critical importance to understand the process of transition of a socialist country into a rising imperialist nation in just three decades and its underlying implications.
Image courtesy – http://www.leftcom.org
Capitalism was restored in China in late-1970s after the demise of Mao. This restoration process was given formal shape by Deng Xiaoping with his so called “Market Socialism”. As part of this process, the old collective farms were abolished and replaced by family farms which started producing for the market. In the rural areas, profit-oriented Town and Village Enterprises were introduced. These enterprises produced light industrial goods for the market. Lakhs of old, inefficient state-owned enterprises were closed down and millions of workers working in these enterprises were sacked. Further, new export-oriented industrial zones in the Pearl River Delta in the south (adjacent to Hong Kong and Macao), in Fujian province (close to Taiwan), and around Shanghai were created. This enabled increasing inflow of foreign investment, initially by the Chinese diaspora in Hong Kong, and later by big Western, Japanese and Korean companies. All these steps paved the way for capitalism of Chinese variety which led to unusually high growth rate of Chinese economy between 1980 to 2014.
The current position of China in the world economy
The Chinese economy is the second largest economy after the USA in terms of Nominal GDP. It has a Nominal GDP exceeding 10 trillion USD which is greater than the sum of the GDP’s of the third and fourth largest economies, i.e., Japan and Germany, respectively.
Since the cost of living and the values of currency are different in various countries across the world, the value of a nation’s currency should also be kept in mind in addition to its GDP to gauge the real position of that nation in the world economy. Purchasing Power Parity (PPP) is an indicator that takes this into account and according to this indicator China is already the largest economy in the world.[1] The Chinese share in the world economy was less than 2 percent in 1990 which had increased to 13% in 2014.[2] At present, 80 percent of air conditioners, 70 percent of mobile phones and 60 percent of the shoes in the whole world are made in China.[3] As per the World Bank data, the share of China in garments export in the global garment export is more than 40 percent. In manufacturing sector, which is considered to be the principal sector of value creation in the capitalist system, China has become the leading country in the world thereby bypassing US which had been the leader in manufacturing for 110 years. China produces around half of the raw iron of the world. Marxist geographer Professor David Harvey has shown that the consumption of cement in China between 2011 and 2013 was one and a half times the consumption of cement in US in the entire 20th century. In addition, China has made rapid advances in mining and service industries in recent decades. Today, 30 percent of the economic growth in the world is attributed to China.
In a study based on the Forbes list of the top 2000 multinational companies of the world, Christian Fuchs has shown how the influence of Chinese companies has increased at astonishing levels between 2004 to 2014 in comparison to north American (or European) companies in terms of number, assets and profits.
2004 2014
Number of Chinese MNCs in the top 2000 companies 49 207
Number of American MNCs in the top 2000 companies 751 563
Share of Chinese companies in assets 1.1% 13.7%
Share of Chinese companies in Profits 3.6% 14.3%
Share of North American and European companies in Assets 77.4% 63.1%
Share of North American and European companies in Profits 82.9% 61.7%
Innumerable such statistics can be provided that prove that China is beating various longstanding imperialist nations in the front rows of capitalist economies.
Development of monopoly and the rise of finance capital in Chinese economy
Despite the capitalist restoration at the end of the 1970s, there was a predominance of public enterprise in the Chinese economy until 1990. But as the process of privatization gained momentum from 1990s, the role of public sector in Chinese economy has been constantly declining. The management in the public-sector companies is now as dictatorial as that in the private companies. The current situation is that the majority of the production is in the private sector, although the public enterprises continue to play an important role in Chinese economy. Just like the private companies, the public companies also operate on the principle of maximizing profits and the profits made by them does not go to the government but to a fund specially created for the public-sector companies. Thus, monopoly capitalism has been on rise in both the public and the private sectors along with the process development of capitalism in China.
The extent of monopoly in Chinese economy is such that China occupies the second place after US in the Forbes Global 2000 list of the 2000 largest and most influential companies. There are 565 US companies in this list whereas 263 are Chinese. More than 100 companies in the Fortune Global 500 list are from China whereas this number in 2001 was just 12.[4] More than two-thirds of these are private sector companies. Out of the 10 largest banks in the world, 4 are from China. This fact points to the increasing dominance of China in the global finance market. With the fusion of industrial and banking capitals, a huge empire of finance capital has developed in China too which is continuously gaining increased importance in the Chinese economy. Most of the banks and insurance companies are still owned by the state. Thus, a specific kind of state-monopoly-capitalism has developed in China.
Export of Capital
In recent years, the Chinese economy has made huge strides in the export of Capital too which is indicative of its rising imperialist power. Capital is exported from China in both forms – investments in production (construction of factories, roads, ports, etc.) and finance capital (bonds, loans etc.). As a result of rapidly rising capital accumulation in the production sector in the last three decades, a huge reserve of finance capital has accumulated in China. An indicator of this is its copious foreign exchange reserve. Whereas this reserve was 1.65 billion USD in 2000, it has now increased to roughly 4 trillion USD. A large portion of this reserve is in the form of investments in treasury bonds in America and various European countries. As a result of these investments in the treasury bonds, China has become the largest creditor to the US government.
Apart from investing finance capital in the imperialist countries, China is also exporting finance capital in the form of development loans to the developing and underdeveloped countries taking benefit from the vast amounts of capital accumulated by the exploitation of its own working class. China has surpassed even the World Bank in providing loans to the third world countries. Asian Infrastructure Investment Bank (AIIB) was founded under the leadership of China on 16th January 2016, with its headquarters in Beijing. This is a multilateral development bank with development of infrastructure in Asia as its special mandate. In this bank with a paid-up capital of 100 billion USD, 50 billion has come from China alone. This bank will give out loans amounting to 10-15 billion USD every year in the first five or six years. In addition to the launch of AIIB, China also joined European Bank for Reconstruction and Development (EBRD) as its 67th member. While AIIB will focus on funding for infrastructure in Asia, EBRD will focus on on development projects in Eastern Europe and Central Asia. Apart from this, China has also played a major role in the founding of BRICS bank or New Development Bank (NDB) formed by the BRICS countries. The leading role of China in AIIB, EBRD and NDB is indicative of the decline in hegemony of the so called Bretton Woods sisters, the World Bank and the IMF, and to fundamental changes in the global financial system. China has already left the western imperialist nations behind in providing loans to the third world countries. It is noteworthy that the interest rates on the loans given by the Chinese banks is often more than that by other international financial institutions. For example, Sri lanka has taken loans amounting to billions of dollars from China. The net national debt of Sri Lanka is 64.9 billion USD of which 8 billion is from China which is at a very high interest rate. For instance, Sri Lankan government has taken a loan of 301 million USD from China at an interest rate of 6.3 percent for the construction of Hambantota port whereas the world bank and Asian Development Bank provide loans at interest rates from 0.25 to 3 percent. Sri Lankan government was unable to repay this loan due to slowdown in the economy and therefore decided to convert this debt into equity. This can result into the Chinese ownership in that project. In addition, Sri Lankan government has also decided to grant 80 percent of shares of the Hambantota port to Chinese companies and also to give on lease the entire port for 99 years. Similarly, Chinese companies have been granted complete control of operations and management of Mattala airport in Sri Lanka. It should be noted that the Sri Lankan government had constructed Mattala airport through a loan of 300-400 million USD from China. As the Sri Lankan government is not able to bear the expenses of the operations and the transport in this airport, it has granted its control to Chinese companies.
Even before the onset of the global recession in 2007, China had started to change the course of its economy from an exporter of cheap products to an exporter of capital as part of its ‘Go Global’ policy. After the beginning of recession, China has made huge strides in this direction. China had exported capital amounting to a total of 400 to 600 billion USD in 2011. It is true that there is also the import of capital on large scale into Chinese economy, but in the recent years the export of capital has increased much more rapidly than its import and China is now a net exporter of capital.
Presently, China is investing capital in all the corners of the world including the developed western countries and the countries of Asia, Africa, Latin America. Chinese companies are heavily investing in many American companies and are also acquiring many of them which has horrified the American capitalist class. China has invested heavily in mining, oil, gas and other natural resources in Australia and has recently also started to invest in food products, agri-business, real estate, renewable energy, high tech and financial services there. Similarly, in Canada it is investing in oil, gas and mining at large scale. The main investments of China in Brazil are in energy and metal industries. In other countries of South America like Peru, Argentina, Ecuador etc China is investing in energy and infrastructure sectors. In its neighboring country Vietnam, China is investing very heavily in extraction of wood, rubber and minerals and in developing railways for transporting the goods from there to China. Similarly, China is investing on a large scale in countries of the Indochina and southeast Asia. It is investing in Nepal, Pakistan, Bangladesh and Sri Lanka in south Asia. China has left India behind in terms of capital investments in Nepal. Moreover, China is also grabbing the opportunity of capital export to India to take advantage of the ‘Make in India’ scheme.
China is especially focusing on capital export to Africa. It should be noted that during Mao era China used to provide friendly help to African countries by investments in sectors ranging from basic infrastructure to mining. But in current times, China is exploiting this old friendship for its imperialist ambitions by large scale capital investments with the purpose of plunder of oil and minerals necessary for running its own economy at a high pace. Angola has become one of the largest supplier of oil to China. China has invested more in African countries like Nigeria, Zambia, Ghana, Libya, Rwanda and Sudan. More than 800 Chinese companies are currently operating in whole of Africa and more than 1 million Chinese citizens live there. These facts in themselves portray the Chinese imperialist intervention in Africa.
‘One Belt, One Road’ Project
The widely talked about ‘One Belt, One Road’ (OBOR) project in itself is indicative of the imperialist ambitions of China. 60 countries, with total population exceeding 4 billion and more than 40 percent of the share of the GDP of the world, are likely to join this project.[5] There are two parts to this project – Silk Road Economic Belt and Twenty-first Century Maritime Silk Road. Silk Road Economic Belt includes many infrastructure and commercial projects including road, railways and oil and natural gas pipelines between China and Europe. It will start from Xi’an province of China and extend to Moscow, Rotterdam and Venice passing through central Asia. There will be many routes in this project which will pass through China-Mongolia-Russia, China – central and western Asia, China – Indochina Peninsula, China-Pakistan and China-Bangladesh-Myanmar. Whereas Twenty-first Century Maritime Silk Road project comprises of plans of development shipping lanes, sea networks and ports covering entire Asia and the Pacific. Its expanse will be from south and southeast Asia to eastern Africa and northern Mediterranean Sea. As per the Chinese state media, an investment of 1 trillion USD has already been made in this project and investment of several trillion is planned by next decade. [6] In should be noted that this project is not limited to infrastructure development. As per its vision document it includes plans of coordination of economic policies, adoption of uniform technical standards for infrastructure, removal of obstacles in investment and trade, establishment of free trade zones, financial coordination and establishing connection between people through cultural and academic exchanges.[7] China hopes to recover from the crisis of overproduction that it has in the heavy industries like steel, aluminum and cement and also to prepare new markets for its goods and products by exporting capital through this project. Along with increasing its economic dominance China also wants to the boost its military power through this project. For example, under this project Chinese government firm Cosco has bought 67 percent of shares of the Greek port Piraeus and thus taken control of it which will help China establish a foothold in Europe. Similarly, under this project China also wants to develop a new sea route from southwest China to Indian Ocean to reduce China’s dependence on Malacca strait and Singapore for accessing Indian Ocean. China is helping develop the Gwadar port in Pakistan also for an alternate route to its access to Indian Ocean.
As mentioned above, Chinese companies are in control of Hambantota port and Mattala airport in Sri Lanka to a large extent. This will increase China’s strategic and military dominance across the entire Indian Ocean region. Similarly, China has already granted loans amounting to more than 50 billion USD to Pakistan at high interest rates for China-Pakistan Economic Corridor. Experts believe that Pakistan will take at the very least 40 years to repay this loan. China has played major role in the construction of the Gwadar port in Pakistan. China is also heavily investing in the infrastructure sector in Myanmar and Bangladesh in the same vein.
China’s Increasing Military Might and the Sharpening Inter-imperialist Rivalry
With the enhancement of its economic dominance, China is rapidly developing its military capacity as well. China is next only to USA in terms of military expenditure. China has specially focused on modernizing its military during the last decade. China is developing warships, submarines, aero planes, electronic intelligence systems and foreign bases with the purpose of establishing itself as a global military power. It is developing its military capacity for various contexts such as remote seas, air, land and subsurface areas. China is continuously increasing the number of its nuclear warhead equipped submarines. Apart from this, China is also establishing its military bases in other countries, for example, in Djibouti in Africa. Also, the ports that China is developing in Sri Lanka and Pakistan will increase its strategic capacity considerably.
China has made rapid advances in export of arms in the last decade. China is now the third largest weapon exporter in the world, after USA and Russia. China also sends more than 2000 troops as part of the United Nations peacekeeping force, which is the largest of all the members of the United Nations Security Council. This provides the Chinese troops with valuable experience of fighting in different conditions.
China’s presence as an emerging imperialist power in the world and its rising military might has sharpened the inter-imperialist rivalry on the global scale. The condense manifestation of this contradiction can be seen in the ongoing conflict in the South China Sea. It should be noted that one fourth of the total crude oil and half of rest of the commercial goods pass through South China Sea. Chinese military strategists have divided the entire disputed sea area in two different chains of islands in accordance with the concept of ‘two island chains’. The first chain, “nine dashed islands” are the areas regarding which China has disputes with Vietnam, Philippines and Malaysia. China wants to establish its dominance in almost the entire South China Sea. The second chain is a little bit further, where China has dispute with an imperialist country like Japan. South China Sea is crucial for China not only for trade but also from the perspective of resources. Apart from fish and other seafood, it has been speculated that this area is extremely rich in oil and gas reserves. Due to its enormous military and economic importance, this region is witnessing some kind of arms race and all the countries on the shore of South China Sea are growing their military capacities. Even USA is perplexed as China is establishing its dominance over this area and therefore it is extending military support to many countries in the region, which is in turn making the entire situation even more tense.
Although China cannot directly challenge the US in one on one conflict because China is still much weaker than US in terms of military capacity, yet, recent years have witnessed a clear emergence of a new imperialist axis under the joint leadership of Russia and China in opposition to the US led imperialist axis. The ongoing wars in Middle East especially in Syria are clear indications of the sharpening of these inter-imperialist contradictions. Emergence of multilateral organizations such as Shanghai Cooperation Council and BRICS in itself is sufficient to refute the myth of unipolar world. Meanwhile signs of split in NATO are also becoming clear with the exit of Britain from the European Union and due to Trump’s protectionist policies in US. This opens a possibility that some European countries may also switch the camp. In any case, it is certain that the inter-imperialist conflicts are going to sharpen further in the days to come. Although the chances of a World War seem to be remote in the current circumstances, still regional wars and violent incidents are sure to increase.
References
[1] “Report for Selected Countries and Subjects”. IMF
[2] http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
[3]http://www.economist.com/news/leaders/21646204-asias-dominance-manufacturing-will-endure-will-make-development-harder-others-made
[4]https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/corinnejurney/2017/05/24/the-worlds-largest-public-companies-2017/
[5] https://eng.yidaiyilu.gov.cn/info/iList.jsp?cat_id=10076&cur_page=1
[6] https://news.cgtn.com/news/3d63544d3363544d/share_p.html
[7] http://blogs.worldbank.org/eastasiapacific/china-one-belt-one-road-initiative-what-we-know-thus-far#_ftnref1
(Translated from Hindi by Nitin Kumar)
- Published in Anvil-2, Jan-Mar 2018
